Technical Market Report

• The NYSE AD line hit a new cycle high last Wednesday. This implies
new cycle highs in the blue chip indices in the next 2-6 weeks.

• The number of new lows has been insignificant.

Last week formed a mirror image of the week before, i.e. the first three days
of the week were very strong and the week ended with a very week Friday, the
opposite of what happened the previous week.

The weakness that developed at the end of last week makes me uncomfortable.

Summation indexes are calculated by adding oscillator values to a running
total. When the oscillator is above 0 the summation index rises, when it is
below 0 it falls. I calculate summation indexes on advances and declines, new
highs and new lows and upside and downside volume. The oscillator parameters
vary to make the indicator more useful. These indexes are calculated from data
on sectors as well as the broad market. When the indexes are in agreement,
it is imprudent to bet against them.

At the end of last week all of the broad market as well as most of the sector
summation indices turned downward. The exceptions were in gold, energy services,
telecomm and transportation.

The four charts below all show an index and three summation indexes. The first
chart shows the NASDAQ composite and the indexes calculated from total NASDAQ
data. The second chart shows the Dow Jones Industrial average along with summation
indexes calculated from total NYSE data. The third chart shows the Russell
2000 along with indexes calculated from the component issues of that index
and the fourth chart shows the S&P 500 along with indexes calculated from
the component issues of that index.

As you can see, when these indicators are heading in the same direction, they
do a pretty good job of defining the direction of the market. You can also
see that they have all turned downward.

Next Friday is options expiration and the markets will be closed Monday in
observance of Presidents day. For the past fifteen years the four trading days
prior to February options expiration have had a slightly negative bias as you
can see in the tables below.

Monthly report for February
Witching is the options expiration the 3rd Friday of the month.
The witching Friday is marked *Fri*.
The number following the year is the position in the presidential cycle.
The report is calculated as trading days either side of the 3rd Friday.
Presidents day usually falls on one of the Monday's. When that happens the
day will not be properly identified.
Daily returns from the Monday before to the Friday after

S&P 500

Year

Mon

Tue

Wed

Thur

*Fri*

Mon

Tue

Wed

Thur

Fri

1989-1

0.18%

-0.25%

0.83%

0.19%

0.66%

-0.26%

-1.71%

0.39%

-1.68%

0.24%

1990-2

-1.06%

0.28%

0.30%

0.87%

-0.65%

-1.42%

-0.10%

-0.60%

-0.48%

1.39%

1991-3

2.57%

-0.84%

0.96%

-1.30%

1.33%

0.09%

-1.15%

-0.05%

0.19%

0.44%

1992-4

-0.29%

-1.24%

0.22%

1.38%

-0.60%

0.20%

-0.44%

1.19%

-0.36%

-0.28%

1993-1

-0.69%

-2.40%

-0.14%

-0.32%

0.54%

0.23%

-0.10%

1.40%

0.33%

0.24%

1994-2

0.01%

0.49%

0.06%

-0.52%

-0.56%

0.81%

-0.16%

-1.37%

0.39%

0.23%

1995-3

0.04%

0.19%

0.41%

0.14%

-0.67%

0.16%

0.48%

0.38%

0.25%

-0.88%

1996-4

0.77%

-0.14%

-0.75%

-0.65%

-0.51%

-1.13%

1.16%

1.66%

0.03%

-1.31%

1997-1

-0.41%

0.97%

-0.47%

-1.19%

-0.13%

1.06%

0.22%

-0.79%

-1.32%

-0.53%

1998-2

-0.40%

0.26%

0.91%

-0.37%

0.58%

0.38%

-0.73%

1.20%

0.55%

0.06%

1999-3

-1.91%

0.95%

-1.44%

1.08%

0.15%

2.66%

-0.08%

-1.40%

-0.67%

-0.54%

2000-4

0.20%

0.87%

-1.03%

0.04%

-3.04%

0.45%

0.63%

-0.53%

-1.48%

1.10%

2001-1

1.18%

-0.87%

-0.22%

0.81%

-1.89%

-1.74%

-1.85%

-0.20%

-0.56%

1.75%

2002-2

1.43%

-0.40%

0.99%

-0.18%

-1.10%

-1.89%

1.35%

-1.55%

0.82%

1.80%

2003-3

2.14%

1.95%

-0.71%

-0.95%

1.32%

-1.84%

0.72%

-1.31%

1.18%

0.46%

Avg

0.25%

-0.01%

0.00%

-0.06%

-0.30%

-0.15%

-0.12%

-0.11%

-0.19%

0.28%

Win%

60%

53%

53%

47%

40%

60%

40%

40%

53%

67%

Russell 2000

Year

Mon

Tue

Wed

Thur

*Fri*

Mon

Tue

Wed

Thur

Fri

1989-1

-0.24%

0.18%

0.37%

0.47%

0.50%

-0.19%

-0.88%

0.01%

-0.75%

-0.19%

1990-2

-0.40%

-0.20%

0.01%

0.63%

0.06%

-0.91%

-0.51%

0.48%

-0.74%

-0.19%

1991-3

1.61%

0.03%

1.08%

-0.36%

0.97%

-0.04%

-0.84%

0.59%

0.67%

0.65%

1992-4

0.01%

-0.70%

-0.82%

1.21%

-0.23%

-0.72%

-0.63%

1.26%

0.39%

0.07%

1993-1

-0.45%

-3.28%

-1.20%

0.59%

0.49%

-1.27%

-0.25%

0.95%

0.52%

0.75%

1994-2

0.11%

0.51%

0.54%

-0.41%

-0.31%

0.38%

-0.05%

-1.02%

0.30%

0.96%

1995-3

0.04%

-0.11%

0.87%

-0.60%

-0.48%

-0.33%

0.03%

0.40%

0.20%

-0.63%

1996-4

0.09%

-0.49%

0.39%

-0.10%

0.26%

-0.83%

0.76%

1.18%

0.19%

-0.14%

1997-1

0.26%

0.25%

0.03%

-0.71%

-0.32%

0.02%

0.09%

-0.80%

-0.74%

-0.30%

1998-2

0.42%

-0.24%

0.33%

-0.11%

-0.05%

0.51%

-0.44%

0.92%

0.67%

0.06%

1999-3

-1.90%

-0.51%

-1.73%

0.40%

0.31%

1.41%

0.30%

-0.94%

-0.64%

-0.12%

2000-4

0.53%

0.06%

1.39%

1.95%

-2.28%

-0.87%

1.66%

0.75%

0.49%

0.17%

2001-1

1.67%

-0.55%

0.18%

1.06%

-1.88%

-1.63%

-1.56%

-1.29%

0.04%

2.27%

2002-2

1.00%

0.15%

0.92%

-1.17%

-0.32%

-1.98%

1.58%

-1.89%

1.45%

0.67%

2003-3

1.05%

1.68%

-1.17%

-0.15%

1.28%

-1.69%

0.83%

-0.89%

0.97%

-0.25%

Avg

0.25%

-0.22%

0.08%

0.18%

-0.13%

-0.54%

0.01%

-0.02%

0.20%

0.25%

Win%

73%

47%

73%

47%

47%

27%

47%

60%

73%

53%

Last Wednesday the DJIA and S&P500 both hit new cycle highs that were
unconfirmed by the small cap indices. This is part of the pattern that defines
cycle tops. What is missing from the pattern is a modest build up of new lows
and low levels of the new high indicators.

Last week looks like it was a bounce from the oversold levels reached the
week before. At the end of last week, most of the short term indicators had
turned downward.

I expect the major indices will be lower on Friday February 20 than they were
on Friday February 13.

Last week, like the week before, only the NASDAQ composite was down, so I
am calling last weeks positive forecast correct.

Mike Burk independently publishes a weekly newsletter on the stock market from a technical perspective.

Charts and figures presented
herein are believed to be reliable but we cannot attest to their accuracy.
Recent (last 10-15 yrs.) data has been supplied by CSI (csidata.com), FastTrack
(fasttrack.net), Quotes Plus (qp2.com) and the Wall Street Journal (wsj.com).
Historical data is from Barron's and ISI price books. The views expressed are
provided for information purposes only and should not be construed in any way
as investment advice. Furthermore, the opinions expressed may change without
notice.